In this paper Ms. Indupriya S brings her insights on how to align your Human resources as your company grows and transforms from a SME to a larger company.

1. SIndupriya
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Introduction
The importance of human resources to
organizational success has only multiplied as
businesses have become more knowledge and
technology driven (Barney, 1991). Literature
has identified seven universal HR practices that
impact the business performance (Delery and
Doty, 1996, Akhtar, Ding and Ge, 2008). These
practices, known as best practices or strategic
HRM practices include formal training,
outcome based appraisals, employee security,
employee participation, internal career
advancement, job description and profit
sharing.
Small and medium enterprises (SMEs) have
been the backbone of the Indian economy.
That is both a good and a bad thing. A recent
IFC study on MSME finance in India indicates
there are 29.8 million enterprises in various
industries, employing 69 million people. This
sector accounts for 45 per cent of Indian
industrial output and 40 per cent of exports.
Although 94 per cent of micro, small and
medium firms are unregistered, the
contribution of the sector to India's GDP has
been growing consistently at 11.5 per cent
annually, which is higher than the overall GDP
growth of 8 per cent.
The good part first. Employing close to 40% of
India's workforce and contributing 45% to
India's manufacturing output, SMEs play a
critical role in generating millions of jobs,
especially at the low-skill level. The country's
1.3 million SMEs account for 40% of India's
total exports.
The Small and Medium Enterprises' (SMEs)
contribution to Indian GDP is expected to
increase to 22 per cent by 2020, from the
present 17 percent.
Unlike the larger companies that enjoy the
benefits of scale and reach, SME face several
challenges on HR front. Their ability to attract
the right talent and retain the key employee
poses a challenge. Most SME companies have
limited HR resources, often 2-3 resources only.
Unlike larger counterparts, SME have not
embraced IT to automate repetitive work like
payroll and attendance. As a result, most of
their resources are caught with payroll and
follow up. The HR resources have little time to
employee engagement or organizational
identity building activities. It is becoming
important that HR function has the right tools
and technologies to optimize the selection,
hiring, training and retaining of employees. In
absence of right tools and technologies, many
qualified SME HR professionals are caught in
only “transactional” activities and are unable to
bring strategic value to their employers.
A major fallacy in SME companies is they lack
an evolutionary approach to HR as their
company grows over years. Initially, the focus
of HR is recruiting the right candidates,
providing the organization with appropriate
policies and systems. As the company grows in
size, HR has to move from laissez-faire
decentralized approach to bring in formal
system. HR at this stage has to educate the
employees a need for formalization and
processes to capture and analyze data. As the
organization matures, the challenge for HR is to
create open spaces so that innovation and
creativity are not stifled within the company,
and employees take ownership to drive newer
innovation. However, most SME companies
pursue a common agenda approach throught
their life-cycle. Thus result in disgruntled
employees, despaired management and lost
opportunities to build lovable place to work.
We believe building appropriate HR systems in
conjunction with the life-cycle of the firm
ensure right alignment and right strategic fit. In
this paper we explain how HR integration

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makes a firm more effective and efficient and
how it could be implemented.
SME company growth over years
We use organization’s life cycle concept to
describe the changes eventually happening in
the organizations. Many researchers in the past
have proposed different life cycle models using
various variables as time dependent indices to
define and discuss life cycle stages. Numerous
researchers have explained organizational life
process (Chandler 1962; Galbraith 1982;
Churchil and Lewis 1983; Kazanijan 1988; Hoy
2006). Typical life cycle of an organization
typically passes through four stages as (1)
Formative stage, (2) Growth stage, (3) Maturity
and (4) Decline. For our paper, we consider the
first three stages only.
In formation stage, the founder of SME
attempts to establish the firm, ensures its
survival in early stages and build customer
base. The corporate objectives at this stage are
establishment of the organization in terms of
workable place, human resources and
production facilities and acquisition of
customer base.
There are neither defined procedures nor
control systems. There exists a rudimentary
management where every process is loosely
arranged. Also the number of resources is few.
Thus the concentration of expertise is high and
implicit. It has high probability of loss of
information when any key resource absconds/
leaves the firm. The HR objectives at this stage
are to define basic HR policies for employees to
follow.
In the growth stage, the corporate objectives
involve increased production, head count and
development of strong brand through focused
marketing activities. The firm introduces
incremental changes in the process,
technology, products and services. The HR
processes, while well adopted, may need to be
formalized and interlinked across various HR
activities. Companies may be facing loss of
information, employee handling becomes
difficult. HR objectives at this stage would be
to introduce documentation of all processes,
management control system, institute lines of
formal communication and increase the
number of resources.
In the maturity stage, corporate objectives are
rationalizing the customer base,
service/product portfolio; create innovative
culture and look for international opportunities
for expansion. With formalized organization
structure, hierarchy is built in, roles and
responsibilities are clearly defined. The
challenge is to introduce changes, make
employees at all levels have a sense of
ownership and drive a sense of urgency so that
Organization does not suffer from rigidity. The
HR objectives are establishment of
comprehensive processes; standardisation and
automation of processes across organization
and emphasis on outcome – impact analysis.
Table 1: Showcase the corporate and HR
objectives at all the three stages.
Stage of
evolution
of the firm
Corporate
strategy
Expected HR
objectives
Formative/
Foundation
Establish the
organization
quickly
To setup
workable
processes
To identify
affordable
resources
To onboard and
facilitate the
production
process
Ensure go-to
market and
customer
acquisition
To define few
basic HR policies
Low strength in
number of
resources but
employees have
high expertise
Implicit to Explicit
knowledge transfer

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Growth To add more
resources
To add more
product lines
To understand
the key
customers and
account mining
Expansion of its
market share
Branding
Attempt to
formalization of
process
Adoption of
certification of
standardisation
Introduction of
documentation of
HR policies and
processes
Increase in no. of
resources
Introduction of
management
control systems
Lines of formal
communication are
laid down
Partially
formalized islands
of control
Partially
comprehensive and
consistent
processes and
procedures
Emphasis on
delivery quality
and timeliness
Maturity Rationalize
customer base
Rationalize
service/product
portfolio
Manage
productivity
and
effectiveness
Create and
sustain
innovative
culture
Encourage
production
variations
To acquire new
partner and
dealer alliances
Stride into
Organization
structure is
established
Clear descriptions
of roles and
responsibilities.
Processes are
completely
comprehensive and
standardized-
where data is used
to make informed
decisions.
Emphasis on
outcome and
impact analysis
Extensive formal
and informal
horizontal
interactions
between the
functions
international
expansion Design new HR
best practices and
acquire expertise
in them
HR direct
participation in
formulating overall
business strategy
Aligning HR process with life stages using HR
integration framework
Towards aligning HR objectives with corporate
objectives at various life-stages, we suggest
organizations to adopt a four stage approach
consisting of: (1) As-Is Analysis,(2) GAP
Analysis,(3) Next 5-10 years goals and (4)
Prioritization and implementation of HR
activities.
In As-Is Analysis, the current state of the
organization’s life, system, capacity and
functionality are analyzed. The objective is to
collect data and highlight opportunities for
improvement. An As-Is of cultural elements
such as values of the organization, practices,
working style, employee morale, structural
elements as hierarchy, internal rules and
processes, lateral transfers, leadership styles of
the managers; people elements like Gender
break up, non full time employees, experience
of these employees, learning and development
programs given to them, skill gaps, recruitment,
induction, employee satisfaction surveys etc,
financial and operational elements are
assessed.
In GAP Analysis, we determine what
steps need to be taken in order to move from
the current state to the desired future state. It
highlights the gaps that exists and that need to
be filled to achieve the expected HR objectives.
It also measures the investment of time, money
and human resources required to reach the
business goal.

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Depending on what stage of life the company is
in currently, the objectives for Next 5-10 years
are established. This includes the functional
goals of all the functions in the organization
such as Finance, marketing, HR, sales, which
would be aligned with the business goals.
Once the functional objectives are freezed, the
HR activities must be prioritized based on
variables such as time, cost and percentage of
contribution to business objectives.
To align HR objectives with business goals, the
company must have standardized processes
and fool proof Knowledge management
system. For which the following steps need to
be followed:
1. Map each process
a. The complete HR cycle has 6 functions
(recruitment, induction, training,
performance appraisal, reward and
recognition and exit).Each process
should be formulated with quality and
clarity in focus, so that bottlenecks and
unduly long lead times can be
prevented.
b. The flow of items for every process
under HR umbrella must be penned by
benchmarking with similar organization
in the same industry. In HR, the internal
customer needs are the items that flow
through the value stream.
c. Each process flow must be
accompanied with a checklist so that
the entire flow of activities to be done
and time frame to complete each
activity is known. This helps in
monitoring cost and time. Thus
deficiencies can be eliminated to a
large extent by showing
interdependency of various activities.
d. Establish ownership details for every
stage in each process. Every process
has a primary owner and a secondary
owner. The primary owner is the
person responsible for the outcome of
the process and the secondary owner is
the person who reviews the outcome
and its business impact.
e. We suggest each process so defined to
be checked against completeness and
purpose based on PCC-DIO framework.
The PCC- DIO framework related to
 Purpose
 Comprehensiveness
 Consistency
 Delivery
 Impact
 Outcome
Purpose: The process should meet the
objective of integrating each process, functions
and technology. It should focus on actions that
drive performance.
Comprehensiveness: The process should be
detailed and all encompassing. The big picture
of the roles, responsibilities, activities and
different levels of learning and associated tools,
methodologies should be captured. The
process templates designed for capturing data,
the depth and breadth of information thus
obtained should be rich enough to make
informed decisions.
Consistency: The HR systems must be
consistent in terms of data, duration and
procedures throughout the HR life cycle and
show no deviation from the desired
architecture.
Delivery: The timeliness and quality of delivery
by each process should meet the business goals
and be delivered within lead time.

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Impact: The impact analysis of every process on
the concerned stakeholders must be done after
delivery.
Outcome: On completion of each process, its
outcome should be evaluated. It helps the
senior management to understand the
drawbacks and build on strengths while
eliminating errors in the next iteration.
2. Make the processes stay inter-connected
The processes are not separate entities. The
output of one process becomes the input of the
other and few are done in parallel.
3. Capture data for decision making
Subjective information yields no meaningful
decisions. They are mostly based on intuitive
and wild gut feelings. To provide effective
decisions and improve efficiency of the
business, insights must be drawn from
objective data.
4. Enhance knowledge management system
Turning implicit data to explicit data will
provide an edge to the decision makers to
recommend suggestions. It can be documented
and formulated for any further changes in
future. The knowledge management specific to
HR applies to succession planning, decision
making for strategic growth, Knowledge
transfer from relieving employee to a new hire,
and capturing required quantifiable data at
each stage of HR process.
5. Create sense and respond system
Reduce the gap between targets and actual
measurements in terms of cost, time and
quality. Data that is unused or incorrect fouls
up operations and decision making. Hence
continuous improvement of the processes and
knowledge management system should be
made.
Conclusion
As an organization moves from formative stage
to the mature stage, the HR function also
should pass through the optimum growth curve
by meeting the expected HR objectives. In this
paper we have showcased an approach that
has been implemented and yielding results. We
suggest SME companies to adopt a life-cycle
view to create and implement HR processes
appropriate to their life-stage and corporate
objectives, so that value from HR function
could be optimized.
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